Asia's Top Stock Is Now a Chinese Pig Farmer After 88% Surge

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(Bloomberg) -- One of China’s biggest pig breeders is now top of the pile of stocks on the MSCI Asia Pacific Index for this year, as African swine fever continues to disrupt business in the world’s top pork-consuming country.

Muyuan Foodstuff Co. rose 7 percent Tuesday morning in Shenzhen, trading at a record high after advancing by the 10 percent daily limit Monday. That’s taken its rally this year to 88 percent, compared with an 8.6 percent gain by the MSCI gauge. The ascent is even more impressive over six months: Muyuan has soared 146 percent, again the best performer on the index, which is down 1.3 percent in that time.

The surge has been driven by expectations for higher pork prices as African swine fever, which isn’t known to harm humans, reduces pig supply. China International Capital Corp. analysts Sun Yang and Yuan Feiyang said Muyuan should continue benefiting from the outlook on prices, which they see at a cyclical bottom and potentially in line for a bounce in the second quarter.

Support is also coming from Beijing, including the government pledging to support share listing and fundraising by qualified agriculture firms, according to official guidelines.

Muyuan’s gains this week may have been helped by its plan for a pig slaughtering and food processing project in Zhengyang County, as that should limit the negative impact from government restrictions on transportation of live hogs.

“Muyuan’s production capacity is concentrated in Henan province, where pig prices have been lower than the national average due to restrictions on pig transport,” Sun and Yuan wrote in a note dated March 4. The extra two-million hog slaughtering capacity should help accelerate the company’s sales and raise average selling prices, they said, raising their price target on the stock by 43 percent to 60 yuan.

Expectations of higher prices have helped offset disappointing results from last year, when Muyuan’s net profit slid 78 percent, according to a March 1 filing. The company isn’t alone in seeing strong share-price gains on the back of the African swine fever outbreak. The Shenzhen Composite’s agriculture index has outperformed the benchmark’s other subgauges with a 48 percent jump in 2019. Wens Foodstuffs Group Co. is up 46 percent in 2019.

CICC is also positive on Muyuan’s longer-term prospects, saying the company’s expansion into slaughtering will help it adapt to the likely trend of pork consumption in China shifting from predominantly fresh meat to chilled meat, which should also help prevent and control epidemics.

Further reading:

  • March 1: Farmers Cut Hog, Breeding Sow Herds Most in 10 Years
  • Feb. 20: Muyuan Hits Record as Good News Boosts China Farmers
  • Feb. 15: China’s Farm Stocks Have Best Week Since 2015
  • Feb. 13: Pig Farmers Are Big Winners in China’s Silicon Valley
  • Jan. 11: Year of the Pig Will Be a Pig of a Year for China’s Hogs

To contact the reporter on this story: Will Davies in Hong Kong at [email protected]

To contact the editors responsible for this story: Richard Frost at [email protected], Kana Nishizawa

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